Monday's move by Paramount and DreamWorks Animation is sure to further baffle consumers.
The DVD format battle is reminiscent of the videocassette fracas in the 1980s, won by Matsushita Electric Industrial Co.'s VHS technology over Sony Corp.'s Betamax. Many consumers are holding back on hi-def DVD purchases for fear of ending up like Betamax purchasers who bet on the losing format.
Although lower prices will help spur sales of high-definition movie players, consumers will still hold off because they don't want to be stuck with an obsolete machine that won't be able to play new movies from the winning format a year from now, said Chris Roden, an analyst at Parks Associates in Dallas.
"You're not seeing mass adoption right now," said Roden, who projected that consumers would buy 4.9 million high-definition players this year. "People are just frustrated by the format war."
Universal Pictures releases film DVDs exclusively in HD DVD, developed by a consortium headed by Toshiba Corp.
Sony Pictures, 20th Century Fox, Walt Disney Co., Lions Gate Entertainment Corp. and Metro-Goldwyn-Mayer Inc., meanwhile, release titles only in the Sony-developed Blu-ray.
Now, Warner Bros. Pictures and its sibling New Line Cinema will be the only Hollywood studios serving both formats, said Richard Greenfield, an analyst at Pali Research.
"If you want 'Transformers' and 'Shrek the Third,' you'll need an HD DVD player, but if you want 'Spider-Man 3' or 'Pirates 3' you'll need Blu-ray," Greenfield said. "This substantially prolongs the format war."
Paramount had been serving both formats. For DreamWorks Animation, "Shrek the Third" will mark its entry into the high-definition market.
The format battle -- which many had assumed was nearly over -- could drag on for years, one analyst said.
"We don't see an early winner in this," said Jan Saxton of Adams Media Research Inc. in Carmel. "Most people are not aware that the original video format [battle] between Betamax and VHS lasted 10 years."
Katzenberg and Rob Moore, Paramount's president of worldwide marketing and distribution, declined to comment on Internet reports that hefty payments were the motivating factor spurring the two studios.
Nikki Finke of the DeadlineHollywoodDaily.com blog and Greenfield, at his Pali Research blog, said that Paramount would get $50 million and that DreamWorks Animation would receive $100 million for making the switch -- payments that would "meaningfully" boost the bottom lines for both studios.
